Thursday, December 22, 2016

Nonprofits Exist in a Culture of Co-Optation

My last post provoked a heated response from a reader who argued that 501(c)(4)s don't necessarily accept huge donations from billionaires just because they can.

That is of course true, but it's also true that since such organizations are under no legal obligation to disclose the donations they receive, the only way for ordinary people to know how much of their funding comes from special interest groups is through voluntary disclosures.

Unsurprisingly, however, even 501(c)(4)s that claim to be dedicated to transparency are reluctant to disclose that data. OurRevolution became a notorious example of this problem when eight of fifteen staffers resigned en masse because "the group can draw from the pool of 'dark money' that [Bernie] Sanders condemned for lacking transparency."

Within the perverse taxonomy of 501(c) organizations, Weaver's explanation makes sense. Ordinary charities tend to organize as 501(c)(3)s--but are prohibited from attempting to influence election outcomes. Unions can organize as 501(c)(5)s and pursue certain political objectives, but they face stringent membership requirements that a nationwide political nonprofit could not satisfy. In Weaver's defense, a nonprofit that intends to support (or oppose) specific political candidates is in many ways compelled to organize as a 501(c)(4) or a 501(c)(6). As Lee Fang explains:

Like 501(c)(4) issue advocacy organizations, 501(c)(6) trade groups may
take unlimited donations and engage in unrestricted partisan or election
activity. Trade groups are often formed industry associations or
politician coalitions of like-minded businesses. One of the largest of
the new Koch groups, called Freedom Partners, is a 501(c)(6) trade
association.

If Weaver had intended to receive support from Chambers of Commerce, then OurRevolution would be a 501(c)(6). Instead, he intends to recruit impassioned Berners, so OurRevolution is a 501(c)(4). These are essentially his choices if he wants to run a politically partisan nonprofit--and either way he can take unlimited money from undisclosed donors. That's simply one of the corrupt rules governing nonprofit organizations in the U.S.

In other words, our 501(c)s are set up such that a nonprofit that seeks to be politically active will be vulnerable to the influence of dark money as an organizational principle. This doesn't mean that every 501(c)(4) is influenced by dark money, but it does mean that every 501(c)(4) can legally accept as much money as it wants from an undisclosed source without having to tell anyone about the donation.

Of course, organizations can always choose to be transparent about the sources of their funding even if the law doesn't require them to do so. But Weaver has been talking about voluntary disclosures from OurRevolution since September without volunteering any information. Had he been serious about clearing this transparency hurdle from the outset, he would presumably have found a way to clear it before his staff mutinied. Instead, as the LA Times reports, the board of OurRevolution continues to talk about half-measures of transparency:

Responding to earlier controversy over the group being founded as a 501(c)(4) nonprofit,
which critics said ran counter to Sanders’ opposition against allowing
unlimited money in politics, its board has promised to disclose all
donors giving more than $250. It also plans to create a political action
committee that would allow more direct coordination with down-ticket
candidates.

So if your neighbor Brenda Gates scrapes together $300 to send to OurRevolution, the board can satisfy this promise by listing her alphabetically right after Bill Gates, who might have given $300,000--without indicating any disparity between the donations. By doing so, the 501(c)(4) would indeed be going above and beyond what the law requires. But such a gesture would fall well short of transparency.

Since I don't mean to pick on OurRevolution or any other 501(c)(4), allow me to illustrate the vulnerability of all 501(c)(4)s to dark money by focusing on a hypothetical organization dedicated to combating the problem of predatory lenders. Let's call it the People's Bank.

The People's Bank decides to establish itself as a 501(c)(4) not because it expects to receive a huge infusion of dark money, but because it intends to become involved in partisan politics. The People's Bank opposes Debbie Wasserman-Schultz, a longtime cheerleader for the predatory lending industry. One mission of the People's Bank is to get Tim Canova elected in a 2018 rematch against Wasserman-Schultz.

But that's only a minor part of the agenda of the People's Bank. It's primarily focused on opening small offices in economically distressed communities throughout the country to provide low-interest loans to people who have spent their entire lives at the mercy of the local Payday Loan branch.

Small donations from concerned and compassionate citizens allow the People's Bank to open offices in three major cities. Since the people who receive these loans have never borrowed money at anything less than usurious rates, far more of them are able to pay back their loans ahead of schedule than anyone anticipated.

With this new infusion of cash, the People's Bank decides to open offices in a dozen more cities.

This is bad news for the predatory lending industry, so it acts quickly--before the new offices can be opened.

The People's Bank suddenly receives an offer of $2 million from a donor who claims to be very supportive of everything the 501(c)(4) has been doing--but the donor has an idea concerning even more important work the People's Bank can do by educating consumers about how to manage their money more effectively.

To be clear, there is roughly a zero percent chance that this donor will approach the folks in charge of the People's Bank by saying, "I would like to bribe you into abandoning your current mission because it threatens the industry I represent."

Instead, he will praise them before acquainting them with the research of a think tank secretly sponsored by predatory lenders. The research will make a strong (but bogus) case that the lending centers already established by the People's Bank would do more good for people by offering free tutorials on how to balance their checkbooks and file their taxes than by actually lending them money at low interest rates.

The CFO and CEO of the People's Bank will be deeply skeptical of this information, of course. But they will also be thinking about the $2 million donation and how much good they can achieve with it. Let's say that at this point in their development, they've never received a single donation of more than $10,000. The People's Bank has struggled financially since its inception. The CEO and CFO haven't even been reimbursed for the mileage they put on their cars or the hotel stays they covered at their own expense to meet with various legislators and functionaries. They've stretched themselves to the limit just to achieve what little success they've enjoyed thus far. And this posh donor is now talking about setting up a foundation from which they will both draw an annual salary--as long as they focus less on lending money and more on educating people about checkbook management.

Might that have any influence on the way they scrutinize the data from the bogus think tank? Is it possible that the posh donor could wine and dine them, over the course of months, into giving his proposal ever more serious consideration?

The obvious answer is that different people would react in different ways, and there's no way we can know how the CEO and CFO of the People's Bank would respond in this scenario.

But what we do know is that everything about this negotiation with the donor could happen under the veil of secrecy in a 501(c)(4). If the folks in charge of the People's Bank suddenly decide to focus on education instead of low-interest loans, there's no way for their supporters to know that a huge donation influenced that decision.

That's a problem.

It's not the kind of problem that will taint every single 501(c)(4), but it's a vulnerability that is woven into the DNA of any dark money-eligible nonprofit. In Fang's estimation, "most 501(c)(4)
nonprofits are community groups that have little resources and exist to
promote genuine nonpartisan advocacy," so there's no reason to assume that every 501(c)(4) is bankrolled by a billionaire. However, there is good reason to suppose that every 501(c)(4) that threatens the bottom line of a particular interest will receive money from that interest group that comes with strings attached. The money won't be disclosed. The strings won't be discussed. But the influence will have an impact. Otherwise how did an environmental advocacy group such as the Sierra Club (currently a 501(c)(4)--with "The Sierra Club Foundation" serving as its 501(c)(3) affiliate) end up supporting the earthquake-inducing and water-poisoning practice of fracking through 2012?

You can object (as Hillary Clinton supporters were fond of objecting) that the appearance of corruption isn't evidence of corruption.

If activism in the US doesn't exist in a culture that steers activists towards systematic co-optation by the moneyed interests that benefit from pollution, war profiteering, and the repression of communities of color, then what's your explanation for all these failures?

Is it that concerned citizens need to do a better job of supporting dark money-eligible nonprofits?